R18 million fraud haunts #Zimbabwe businessman Mutumwa Mawere

Darlington Musarurwa Business EditorSHABANIE MASHABA MINE (SMM) has instituted sequestration proceedings against South Africa-based Mr Mutumwa Mawere’s estate to recover more than R18 million that was fraudulently transferred to the businessman’s Petter Trading.

A sequestration order will make the former industrial magnate technically insolvent. Under South Africa’s insolvency laws, when the order becomes operational, the debtor’s assets are liquidated and distributed among creditors, which might mean an end to Mawere’s vast and sprawling business empire. At the heart of the ex-tycoon’s woes is a judgment by South Africa’s High Court on October 11, 2012 which found that Mawere and one of his directors, Mr Parmanathan Mariemuthu, used fraudulent court papers to effect an R18 million transfer due to SMM from Southern Asbestos Sales to Petter Trading.

SMM, Southern Asbestos and Petter Trading were all sister companies under Africa Resources Limited, an investment holding company Mr Mawere formed in 1995. After acquiring Zimbabwean and Zambian assets belonging to United Kingdom-domicilied T&N Plc in March 1996, Mr Mawere – as the sole ARL shareholder – effectively gained control of SMM.

SMM was incorporated in Zimbabwe while Southern Asbestos and Petter Trading were registered in South Africa. Though Southern Asbestos and Petter were liquidated in June 2015 and September 2015 respectively, the October 2012 ruling by Justice Nigel Willis – who now sits on South Africa’s Supreme Court bench – made Mr Mawere and Mariemuthu liable to prejudice that SMM suffered.

The judgment enforced Section 424(1) of the Companies Act which states that: “When it appears, whether it be in a winding-up, judicial management or otherwise, that any business of the company was or is being carried on recklessly or with intent to defraud creditors of the company or creditors of any other person or for any fraudulent purpose, the court may, on the application of the Master, the liquidator, the judicial manager, any creditor or member or contributory of the company, declare any person who was knowingly a party to the carrying on of the business in the manner aforementioned, shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the court may direct.”

Exhausted options

For four years SMM has struggled to recover the money as Mr Mawere pursued various legal options to rescind the judgment. While fellow director Mr Mariemuthu accepted his fate in terms of the judgement, Mr Mawere has been trying to get it reversed.

At first, he applied for leave to appeal. That was dismissed. Then he applied for direct access to South Africa’s Constitutional Court (case number 16/13). That was also dismissed – with costs. Subsequently, he petitioned South Africa’s Supreme Court of Appeal for leave to appeal (case number SCA376/2013). Again that was dismissed, and again with costs.

At that point, Mr Mawere applied to rescind the court order that was made for him to restitute the money owed to SMM. The result – another dismissal with costs. Despite exhausting all legal avenues, Mr Mawere did not repay the R18 million, resulting in the sequestration proceedings instituted on November 16, 2016.

Last card

Now Mr Cleopas Sangura – who was Southern Asbestos’ financial manager when the fraudulent transactions took place – has applied for a rescission application (case number 2016/40602) to stay the execution of the October 2012 order, and also to seek to intervene in the sequestration application. SMM’s lawyers, Edward Nathan Sonnenbergs Inc (ENSafrica), have interpreted Mr Sanangura’s move as “an abuse of court process and simply the next installment in a litany of matters where Mawere seeks to avoid the consequences of the order”.

Mr Sanangura avers that execution of the judgment will erroneously make him complicit to the fraud that was committed between May and December 2004. He claims that the judgment – which was made after a fully contested trial in which he was the key witness – depended on mischaracterised evidence purportedly contributed by him. If the judgment and court order are allowed to stand, Mr Sangura believes, they will have an immense reputational damage on him.

In an answering affidavit dated May 25, 2017, Ms Kirsty Leigh Simpson of ENSafrica argues that Mr Sanangura, who she describes as “clearly friendly with Mawere”, is making the same arguments initially made by the latter. “The fact that he only instituted this rescission application when the sequestration application was instituted is indicative of the fact that Sanangura is simply using the rescission application to delay the execution of the order (which he expressly confirms); it is not brought to clear his name,” she says. “Mawere has exchausted all his legal remedies and now Sanangura is attempting to delay the inevitable.”

Apart from saying Mr Sanangura has no locus standi (right/capacity to bring the action), ENSafrica also contends that the application has been submitted late. Last week, Ms Simpson told The Sunday Mail Business that she has “no mandate to engage with the media in regard to this matter”. SMM administrator Mr Arafas Gwaradzimba also said he could not comment as the matter was before the courts.

‘Friend’ of the Courts

Mr Sanangura is no stranger to the courts. After the October 11, 2012 judgment which ordered Messrs Mawere and Mariemuthu to pay SMM R18 million, the former Southern Asbestos executive wrote a bristling letter to the chair of SMM’s attorneys, Professor Michael Katz.

He accused SMM’s lawyers Ms Simpson and an Advocate Botha, and Justice Willis, of improperly relying on his evidence or testimony given during court proceedings to conclude that he facilitated the fraud. He threatened to file criminal charges against the law firm unless the company clarified that he was not involved in the fraudulent scheme.

ENSafrica are gearing up for another court batlle. On January 19 this year, the law firm wrote to Mr Sanangura advising him that they would contest his latest move. In the answering affidavit, Ms Simpon makes reference to Mr Sanangura’s misconduct while he was still employed by Messer Zimbabwe Private Limited as its financial manager.

Messer Zimbabwe hit turbulent times and sought to retrench Mr Sangura and other employees. But as retrenchment talks dragged, Messer Zimbabwe decided to dismiss Mr Sanangura for misconduct. “More specifically, it was alleged that the appellant (Mr Sanangura) had converted to his own use large sums belonging to the first respondent (Messer Zimbabwe)”.

He was suspended and the company sought permission from the Labour Ministry to fire him. Mr Sanangura approached the High Court of Zimbabwe seeking an order to attach Messer’s funds to recover what he felt was due to him. But before the order was granted, he attached some funds nonetheless, and the High Court dismissed the order he had sought in the first place.

Mr Sanangura appealed to the Supreme Court which, in dismissing his appeal, noted that he had not made any attempt to deal with misconduct allegations leveled against him.

SMM TIMELINE

April 2004: Messrs Mutumwa Mawere and Parmanathan Mariemuthu procure a signature for a cession agreement in terms of which Southern Asbestos Sales (Shabanie and Mashaba Mines marketing arm in South Africa) purports to cede more than R74 million to Petter Trading. The funds are ostensibly meant to pay for equipment supplies. Curiously, the cession agreement is backdated to 2003.

Messrs Mawere and Mariemuthu get a court order from Justice van Oosten on the basis of the cession agreement. However during the application for the order, SMM is not served with the papers.

May-Dec 2004: More than R18 million is transferred to Petter Trading. The movement of the funds is deemed illegal as it contravenes Zimbabwe’s exchange control regulations. Also, SMM’s board does not sanction the transaction.

2005: Southern Asbestos Sales is liquidated. At the time it owes SMM more than R100 million. Petter Trading is also liquidated that year.

Oct 2012: Justice Nigel Willis of the South Africa High Court (case number 20235/2006) grants an order in favour of SMM saying Messrs Mawere and Mariemuthu should restitute R18 million that was fraudulently transferred from Shabanie Mashaba Mine to Petter Trading through Southern Asbestos Sales.

It is noted that the “cession agreement” was fraudulent. The judgment is in terms of Section 141(1) of the Companies Act, making Messrs Mawere and Mariemuthu personally liable for the debt owed to SMM. Mr Mawere unsuccessfully appeals the judgement

Jan 2017: Mr Cleopas Sanangura, the former financial manager at Southern Asbestos Sales, makes an application to rescind the October 11, 2012 judgment and also to be included in the sequestration proceedings.

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